The Importance of Decentralization: Reflections from Wall Street to Blockchain

Recently, a confrontation between retail investors and Wall Street institutions has sparked a deep reflection on Decentralization. This event not only exposed the shortcomings of the traditional financial system but also provided us with an opportunity to reassess the value of Blockchain technology.

Bitcoin and Ethereum, as the two largest decentralized projects in the world, have been committed to exploring how to eliminate dependence on third-party guarantees since their inception. The development of these two projects has provided humanity with a new way of thinking that breaks existing boundaries. However, recent events indicate that even in systems with a high degree of decentralization, centralized risks still exist.

In the US stock market, a group of retail investors successfully fought against institutional investors shorting a company's stock through collective action. These retail investors pushed the stock price from $3 to over $300 by buying up large amounts of shares, causing the short-selling institutions to incur huge losses. However, just as the retail investors were about to celebrate their victory, a series of unsettling events occurred.

Some trading platforms suddenly announced restrictions on trading, allowing only the sale and not the purchase of related stocks. Moreover, the main forum server where retail investors gathered was shut down, causing their communication platform to collapse instantly. These actions have raised questions about fairness and centralized power.

This event has prompted us to re-examine the importance of Decentralization. As the world's second-largest Decentralized protocol, Ethereum offers vast possibilities for open financial markets. From initial coin offerings to Decentralized Autonomous Organizations, Decentralized Finance, and Non-Fungible Tokens, Ethereum has witnessed the birth of numerous financial innovations.

However, there are potential centralization risks within the Ethereum ecosystem. Due to the complexity of Ethereum, many developers and users rely on certain third-party service providers to connect to the Ethereum network instead of running their own full nodes. This reliance may become a potential weakness for the entire network.

This service provider handles about 13 billion code requests daily, providing convenience for developers. However, it is operated by a single vendor and relies on servers from a certain cloud service provider. This dual centralization risk could lead to a single point of failure, affecting the stability of the entire Ethereum network.

What is even more concerning is that many decentralized applications and users may not be aware of this potential risk. If this key service provider or the cloud services it relies on encounter issues, a large number of decentralized applications may be affected. Furthermore, user privacy may also be at risk, as service providers may collect sensitive information such as users' wallet addresses and IP locations.

These issues remind us that even in decentralized systems, we must remain vigilant against potential centralization risks. For all decentralized protocols, especially applications built on Ethereum, it is crucial to thoroughly study and address these issues.

In a context of enormous market interests and increasing regulatory pressure, we must be fully prepared for the worst-case scenario. Decentralization is not just a technical choice, but a value concept. Only by continuously improving and strengthening the practice of decentralization can we truly achieve a more open, fair, and resilient financial system.